Construction Business Tax Deductions

Filing taxes for your construction business is one of the requirements of business ownership. Lower your tax bill when you know which business deductions you can take.

Business Expenses

Internal Revenue Service (IRS) rules state that you can deduct all “ordinary and necessary” business expenses. An ordinary expense is common in the construction industry while a necessary expense helps your construction business succeed. Examples of ordinary and necessary expenses include:

  • Advertising.
  • Bad business debts.
  • Equipment rental fees.
  • Insurance premiums.
  • Legal and professional fees.
  • Safety equipment.
  • Tool repair and maintenance.
  • Tools.
  • Trade association dues.
  • Travel expenses.
  • Uniforms.
Remember not to deduct the expenses clients reimburse you for. For example, if you purchase materials for a client’s deck repair project and charge the client for those materials, you cannot also deduct those materials on your taxes.

Home Office

As a construction professional, you probably spend the majority of your workday on the job site. However, you can deduct your home office if you use the space exclusively and regularly for business purposes.

Labor Costs

You can deduct the money you pay employees and subcontractors. Be sure to classify employees and subcontractors properly, though, or you could face heavy fines.  

Mixed-Use Expenses

You use your tools, vehicle and other equipment for business purposes, but you may also use these items for personal use. So if you use your cellphone equally for both business and personal calls, you can deduct half your phone bill on your business tax return.

Personal Credit Card

The interest you pay on your personal credit card, home equity loan or other personal credit source can be deducted. However, only deduct the interest owed for the purchases you make exclusively for your construction business.

Vehicle

Choose the actual cost or standard mileage deduction for your construction vehicle. For the actual cost, track the total expenses you pay for the vehicle’s operation, including fuel, repairs and insurance, and the percentage of time you use the vehicle for business purposes. For the standard mileage deduction, track the total number of miles you drive the vehicle for work purposes and take a standard deduction per mile.

Keep Accurate Records

To make tax filing easier, track your income and expenses throughout the year. You'll stay more organized when you schedule time each month to sort receipts. Also, double check that you’ve correctly recorded and calculated all your income and expenses so your tax return is accurate.

Your construction business qualifies for numerous tax deductions. Talk to your insurance agent or accountant for more information as you take time at the end of the year to prepare to file your 2018 tax return and lower your bill.
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